NEW YORK, April 14 (Reuters) - The municipal bankruptcies in
Detroit and Stockton, California, may foretell more widespread
problems in the United States than is implied by current bond
ratings, a top Federal Reserve official said on Tuesday.

"While these particular bankruptcy filings have captured a
considerable amount of attention, and rightly so, they may
foreshadow more widespread problems than what might be implied
by current bond ratings," New York Fed President William Dudley
said at a closed-door workshop on Chapter 9, the part of the
U.S. bankruptcy code covering local government insolvencies.

"We need to focus our attention today on addressing the
underlying issues before any problems grow to the point where
bankruptcy becomes the only viable option," he added, according
to a text of his speech.

Dudley, whose Fed district includes the debt-stricken U.S.
territory of Puerto Rico, did not mention by name any
municipalities or states that risked going the way of Detroit
and Stockton. But he highlighted the difficulties some
jurisdictions face when they issue debt to finance operating
deficits, and when they under-fund public pensions.

In Chicago, for example, unfunded pension liabilities for
the city, the board of education and other local governments
that draw taxes from it exceed $35 billion, according to the
Civic Federation, an independent fiscal watchdog.

The city, which received a warning last week from ratings
agency Standard & Poor's, has $8.3 billion in general obligation
bond debt and frequently uses debt to close budget shortfalls.

Puerto Rico, meanwhile, is struggling with more than $70
billion in total debt and must overcome opposition from local
lawmakers as well as demands from investors for extra security
as it attempts to sell more debt.

Dudley said borrowing to pay off a current year operating
deficit is inconsistent with running a balanced budget, leaves
the municipality with no new asset, and is "equivalent to asking
future taxpayers to help finance today's public services."
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